As a means to thwart improper payments and reduce payment errors, the Centers for Medicare & Medicaid Services (CMS) put forth three new projects for 2012 designed to cut the Medicare fee-for-service error rate in half and recover nearly $2 billion in improper payments.

According to CMS, an additional goal of the projects is to reduce overall payment errors by $50 billion.

To achieve these goals, CMS announced in November that it will launch three demonstration projects beginning January 2012 to help curb improper payments by pinpointing the most common factors that cause fraud, waste and abuse:

• Recovery Audit Prepayment Review: The Recovery Audit Prepayment Review demonstration will allow Medicare Recovery Auditors (RACs) to review claims before they are paid to ensure that the provider complied with all Medicare payment rules. According to CMS, the RACs will conduct reviews on claims that led to high rates of improper payments in the past. The reviews will focus on seven states: Florida, California, Michigan, Texas, New York, Louisiana and Illinois. CMS’ goal is to reduce the error rates by preventing improper payments before they are made.

• Prior Authorization for Certain Medical Equipment: This project will require prior authorization for certain medical equipment and devices, including cardiac devices and cardiovascular-related procedures, for Medicare beneficiaries who live in seven states that have had high rates of fraud and error: California, Florida, Illinois, Michigan, New York, North Carolina and Texas. This will aim to appropriately bill and prevent errors in payments.
• Part A to Part B Rebilling: The third initiative will allow hospitals to rebill for 90 percent of the Part B payment when a Medicare contractor denies a Part A inpatient short stay claim as not reasonable and necessary due to the hospital billing for the wrong setting. Currently, when outpatient services are billed as inpatient services, the entire claim is denied in full.

According to CMS, the prior authorization requirement will be implemented in two phases of the three-year project. During the first phase, in the first three to nine months, Medicare administrative contracts will conduct reviews on certain medical equipment claims. In the second phase, prior authorization will be implemented as a tool used by private-sector healthcare payors to prevent improper payments and curb fraudulent payments.

As far as the Part A to Part B Rebilling project goes, hospitals will be allowed to resubmit claims for 90 percent of the allowable Part B payments if a Medicare administrative contractor or recovery auditor finds that a beneficiary met the requirements for Part B services but not Part A inpatient stay requirements.

According to CMS, the improper payment rate for Medicaid is 8.1 percent ($21.9 billion); however, this rate decreased 1.3 percent when the U.S. Department of Health and Human Services (HHS) stepped in to educate providers on the causes of most improper payments.

“While improper payment rates are not necessarily an indicator of fraud in Medicare and Medicaid, they do provide HHS, CMS and states with a more complete assessment of factors leading to error rates and new ways to help prevent them,” CMS summed in a statement. “CMS is continuing to invest time and resources to work with providers across the country and eliminate errors through increased and improved training, education, and outreach.”